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 Dear
Bankruptcy Adviser,
I filed a Chapter 7 bankruptcy five years ago.
My dad was a co-signer on a credit card and he
did not file bankruptcy. The creditor has sold
the $7,500 debt to a collection agency to try
and collect from my father. I would have thought
that the statute of limitations is up to collect
on this debt.
-- Kathryn
 Dear
Kathryn,
You ask a very interesting question that people face all the time. As you may know, a co-signer is 100 percent liable for paying
the debt incurred by the primary cardholder. This liability takes on two forms: legal and moral liability.
Your father still could be sued for this debt. It is not uncommon for a creditor to sue a person even after the statute of
limitations has run out because, quite often, the debtor will not respond to the lawsuit. As a result, the court will grant
judgment to the creditor because the debtor did not provide any defense. It is not the duty of the court or the creditor to
determine whether the statute of limitations has run out. That responsibility falls directly on your father.
Each state is different, and Bankrate's story, "State
statutes of limitations for old debt,"
can help you find what your state statute of limitations
period is for unpaid debt. The key is to determine
the exact date that you or your father last made
a charge or a payment on the account. In most
cases, that is the date that the statute of limitations period began.
If you can establish that date, then you can determine
whether your father is legally, or just morally,
obligated to pay the debt.
You may be correct that the statute of limitations has passed. But your father will be responsible to prove that it indeed has run. If the statute of limitations period
has not passed, then the original creditor or a collection agency acting as an agent of the original creditor can sue your father
and get a judgment.
Once a judgment is obtained, that debt could exist for many years and it will grow at the court-approved interest rate. Typically
that rate will be around 10 percent. In some cases, the judgment can be renewed every 10 years. This could mean that the judgment
could be valid for decades after the account was originally charged off.
The second issue is a moral one. Assuming that the statute of limitations has passed and you have made the creditor aware of this, then the creditor
cannot legally sue you for the debt. The creditor can call you, visit your home or call relatives and neighbors trying to find
out the co-signer's location. Your father will either have to decide whether it is worth paying the debt or whether he wants to
start a paper trail informing the collection agency that it cannot contact anyone via phone or home visits. Unless the company
is specifically told to stop all contact, it will continue to try to collect on the debt.
If you determine he is only morally obligated to pay the
debt, then he must decide whether to pay it or
notify the company that he refuses to pay the
debt.
To officially notify the company
to stop all collection calls or visits, he must
send a letter via certified mail with return receipt
requested to the company. He must have the returned
portion of the letter in a file for his records.
If a call is received after that receipt is returned,
then he must send another letter, also certified
with return receipt requested.
At that point,
it is very clear that he has done everything possible
to notify the collection agency and its phone
calls are now in violation of the Fair Debt Collection
Practices Act. As a result, an attorney in his
area likely would consider taking his case on
contingency because he has valid documentation
showing he mailed the request notification.
Good luck and do your research immediately.
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